The Organic Trend

Organic food consumption and farming has been growing in popularity given the disdain for the many of the practices within the larger conventional agricultural community and due to a desire to consume products farmed mainly without synthetic pesticides. In addition, consumers and advocacy groups are pushing for transparency with regard to GMO or genetically modified organisms as this part of the crop yielding equation has many worried about our health.

According to wikipedia, “Organic foods are foods produced by organic farming. While the standards differ worldwide, organic farming in general features cultural, biological, and mechanical practices that foster cycling of resources, promote ecological balance, and conserve biodiversity. Synthetic pesticides and chemical fertilizers are not allowed, although certain organically approved pesticides may be used under limited conditions. In general, organic foods are also not processed using irradiation industrial solvents, or synthetic food additives.”

Studies continue from both the organic and the conventional farming communities to aid in our assessment of the health benefits and risks with both methods but there is no argument with regard to the interest and growth of this trend. The amount of sales continues to increase at the traditional super market and specialty health stores. This has established a strong demand for organic farms with top quality soil and farming practices.

It seems to us that there are a number of ways to invest in the organic movement and a couple major reasons why. If the evidence continues to grow that points to major environmental and health flaws in conventional agriculture, the larger farming and food concerns may have their “multiple” eroded as the market perceives them to be more of a societal and investment risk.

The reason that we mention the societal aspect is that we believe that companies and industries that create a positive impact in a social responsible fashion have a solid chance of financial success and the ability to command a premium in the market. Grocers and food companies that possess this attribute may be a more appealing choice among alternative traditional investments.

There are a lot of publicly traded companies to analyze including organic food corporations and specialty grocers and even non-publicly traded interests in the organic farm itself. There is a lot to digest within this area but given the growth and the potential portfolio risk reduction potential, it is worth a morsel of consideration.

Sincerely,

Tom Koehler-CIO

“Socially Responsible Investments represent a complex asset class and while we covered a small amount, there is a lot more information needed prior to making an investment decision. Let us know if we can provide more information to help in that process.”